The economy is hit by the Covid-19 pandemic and affects the short-run aggregate supply. Critically discuss the short-run and long-run effects on output and the price level using the AD-AS diagram: (a) The central bank responded by printing more money.

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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The economy is hit by the Covid-19 pandemic and affects the short-run
aggregate supply. Critically discuss the short-run and long-run effects on output
and the price level using the AD-AS diagram:
(a) The central bank responded by printing more money.
Transcribed Image Text:The economy is hit by the Covid-19 pandemic and affects the short-run aggregate supply. Critically discuss the short-run and long-run effects on output and the price level using the AD-AS diagram: (a) The central bank responded by printing more money.
(b) Suppose that the economy is in the long-run equilibrium after the policy
response in part (a). The central bank would like to return the economy to the
pre-Covid-19 long-run equilibrium; explain how the central bank could achieve
this goal.
Transcribed Image Text:(b) Suppose that the economy is in the long-run equilibrium after the policy response in part (a). The central bank would like to return the economy to the pre-Covid-19 long-run equilibrium; explain how the central bank could achieve this goal.
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